Junk Bond Investors Facing First Global Loss in Five Years… GCC Countries Are Forecast To Lose At Least Half Their Oil Revenues, Or Around $350 Billion A Yearju

Submitted by IWB, on December 19th, 2014

This month’s big fall in the price of oil should be good news for much of the world’s economy. But so far markets have been telling a different story.

The MSCI Europe index has dropped 4% since early December, while the S&P 500 index remains 1% lower over the same period despite a rally Thursday after the Federal Reserve said it would be “patient” before raising interest rates next year. Emerging-market countries such as Turkey and India, which are large oil importers and so should benefit from the price slump, have seen their currencies fall sharply against the U.S. dollar.

Analysts remain confident that the 48% drop in the price of Brent crude since its June peak of $115 a barrel is merely a case of delayed gratification for the global economy. Consumers will have more money in their pockets and companies outside of the energy sector will benefit from lower costs. Credit Suisse economists calculate this is equal to a $100 billion tax cut for the U.S. economy alone.

But although the boon is substantial, it will take a while to feed through to economic data. Meanwhile, the effect of investors dumping stocks and bonds related to the energy sector has rippled across financial markets.

“Markets will take the hit before economies get the benefit,” said Ewen Cameron Watt, global chief investment strategist at BlackRock Inc., the world’s largest money manager, with $4.3 trillion of assets.